Hunter Contracting Co. v. Sanner Contracting Co.

• Decision Date: 10 January 1972
• Docket Number: CA-CIV,No. 1,1
• Citation: 492 P.2d 735,16 Ariz.App. 239
• Parties: HUNTER CONTRACTING CO., an Arizona corporation, Armando Taddei and Marian H. Taddei, husband and wife, Appellants, v. SANNER CONTRACTING COMPANY, an Arizona corporation, Appellee. 1530.
• Court: Arizona Court of Appeals

Page 735

492 P.2d 735

16 Ariz.App. 239

HUNTER CONTRACTING CO., an Arizona corporation, Armando Taddei and Marian H. Taddei, husband and wife, Appellants, v. SANNER CONTRACTING COMPANY, an Arizona corporation, Appellee.

No. 1 CA-CIV 1530.

Court of Appeals of Arizona, Division 1, Department B.

Jan. 10, 1972.

Rehearing Denied Feb. 7, 1972.

Review Denied March 14, 1972.

Burch, Cracchiolo, Levie, Guyer & Weyl by Daniel Cracchiolo, Phoenix, for appellants.

Evans & Kunz, Ltd. by James A. Simmons and Donald R. Kunz, Phoenix, for appellee.

JACOBSON, Judge.

In this appeal, the Court is requested to review an action for breach of contract caused by fraudulent misrepresentation.

The plaintiff-appellee, Sanner Construction Company (Sanner) brought an action against defendant-appellant, Hunter Construction Company (Hunter) for breach of contract and subsequent damages resulting from a fraudulent misrepresentation. The case was submitted to a jury on the theory of fraud. The jury returned a verdict in favor of Sanner in the sum of $178,597.39 as compensatory damages and One Dollar as punitive damages. Hunter has appealed from this judgment.

Hunter, a general contractor, was awarded a contract in November, 1966, by the United States Bureau of Public Roads to build a forest highway in the vicinity of Clint Wells, Arizona. In connection with this project, the Bureau of Public Roads had designated a particular gravel pit which was to be used in obtaining the subbase material utilized on the road bed. Having found a more convenient gravel pit, Hunter submitted a request to the bureau to approve the new gravel pit location. This request was accompanied by various tests of the new pit, performed by Northern Arizona Testing Laboratory. The tests, which were comprised of core samples, were taken from the bureau pit and the new proposed site, the Last Chance Mine. In all, eleven tests were conducted, locations of each test appearing on each of the test reports. In February, 1967, the bureau authorized the change of location from its designated site to the Last Chance Mine location. A distance of approximately three miles separated the two sites. The Last Chance Mine pit was located on land belonging to the Page Land and Cattle Company, from whom Hunter had originally obtained permission to take gravel. After the bureau had approved Hunter's requested change of pit location, the cattle company revoked its former permission. This left Hunter with a smaller area from which to extract the needed gravel.

Hunter had initially employed a subcontractor, Dale Sisson, to produce the gravel necessary for the highway project. Mr. Sisson began working the new smaller pit location, but apparently ran out of material there so he moved his operation to a new location approximately a quarter of a mile away. This third location, which was later known as the Sanner Pit, was not part of the area which had been previously tested. For a number of reasons, Sisson's performance of the subcontract was unsatisfactory and he was discharged.

The president of Hunter, Armando Taddei, contacted Sanner in June, 1967, to determine if Sanner would be interested in the crushing job previously performed by Sisson. The president of Sanner, Bailey Sanner, indicated his interest in the project but indicated he wished to inspect the pit site. Shortly thereafter, Taddei, Sanner and Sanner's crushing foreman drove to the crushing site in Taddei's automobile. During the trip Sanner asked Taddei if he had any tests of the pit location, whereupon Taddei handed Sanner the tests which had been procured for the pit change. Sanner and his foreman briefly examined the reports and then returned the same to Taddei. Upon arriving at their destination, Taddei showed Sanner the last area where Sisson had been working. The pit had been staked out, cleared off (scalped) and partially worked. Sanner and his foreman both testified that Taddei said, 'here are the core samples, here is the pit, how much are you going to charge me?' The core tests were handed to Sanner who then toured the area conferring with his foreman for about fifteen to twenty minutes. After looking at the tests, visually inspecting the staked out pit, and picking up and feeling the soil, Sanner quoted a bid which Hunter accepted. The core tests were then given to Sanner's foreman who was to use them in setting up his screening operation. Subsequently, the parties signed a formal contract which gave Sanner 45 days to complete the job.

In the early part of July, 1967, Sanner began his crushing operation, but during the summer months found it exceedingly difficult to produce the necessary material because of heavy rainfall. After the rainy season ceased in September, Sanner was unable to increase its production because it encountered hard rock material. Since the material Sanner was attempting to extract did not match the core tests, Sanner contacted Northern Arizona Testing Laboratories, which had conducted the core tests shown to Sanner, to perform an examination of the pit. On September 20, 1970, a representative of Northern Arizona Testing Laboratories examined the material and in substance subsequently testified that the site was not suitable for the material known to be needed for the project. He further testified that the core tests made by his company were not performed at the Sanner pit.

When it realized that the job was going to be more difficult to perform, Sanner rented larger equipment and added more men; this additional effort enabled it to complete the contract by mid-December, 1967. The total amount payable to Sanner under the initial contract was $102,701.19, which included a profit of approximately $16,482.00. It was necessary for Sanner to expend approximately $162,000.00 in order to complete the project. Sanner claimed damages in the sum of $178,597.39, representing the cost of completion, together with his anticipated profits.

Hunter's initial contention on appeal is that Sanner was not a duly licensed contractor and hence it was barred from maintaining this action by reason of A.R.S. § 32--1153. This defense was originally presented to the trial court by way of a post trial motion on July 2, 1970.

A.R.S. § 32--1153 prohibits a contractor from maintaining any action for collection of compensation for the performance of any act for which a contractor's license is required without first alleging and proving that he was a duly licensed contractor at the time the contract was entered into and at the time when the claim arose.

Insofar as this defense is concerned, the facts adduced at a hearing before the Registrar of Contractors held on June 24, 1970, showed that Sanner had held a Class A license from the Registrar of Contractors since 1962. The test for the license was initially taken by Adrian Ashley, Sanner's stepfather. Each time the license was renewed, Ashley signed as the responsible managing employee, but he had not been on the company payroll as an employee since 1962. ¹

Appellant argues that since Mr. Ashley was not an employee of Sanner when he made such representation, a fraud has been perpetrated upon the Registrar of Contractors under Rule 26 of the Registrar of Contractors which provides:

'(That) the responsible managing employee . . . shall be a regular and bona fide employee whose principal employment is with the employer for whom he has qualified and must have active and direct supervision and control of all operations . . ..'

Furthermore, appellant contends that the trial court could properly determine the validity of Sanner's license prior to any action by the Registrar of Contractors under A.R.S. § 32--1159, subsec. E which states:

'The suspension or cancellation of a license as provided in this chapter may also be embraced in any action otherwise proper in any court involving the licensee's performance of his local obligation as a contractor.'

We cannot agree with appellant's argument that Sanner lacked standing to maintain this action. The statutes dealing with revocation or suspension of a contractor's license (A.R.S. § 32--1154 to 1160) set out a specific procedure by which a contractor's license may be suspended or revoked. Such action may only be taken by the Registrar of Contractors on his own motion or when activated by the filing of a verified complaint. Moreover, the mere commission of a prohibited act is insufficient in and of itself to invalidate the license. Rather, the Registrar of Contractors must initiate the formal procedure for revocation or suspension and notice of the hearing and an opportunity to defend must be given. Rosen v. Hadden Const. Co., 81 Ariz. 194, 303 P.2d 267 (1956). Therefore, appellant's theory that Sanner was guilty of fraud as a result of which his license was automatically revoked is not well founded.

Nor, in our opinion, can a determination by the Superior Court be substituted initially for a determination by the Registrar of Contractors under Section E of A.R.S. § 32--1159. Such a reading of Section E is totally inconsistent with our well established concepts of exhaustion of administrative remedies. Campbell v. Chatwin, 102 Ariz. 251, 428 P.2d 108 (1967). Administrative agencies exist to make such determinations in their specialized field as the legislature has deemed proper. For this court, or any other court, to make a determination that a contractor's license should be revoked, without a prior administrative determination, is simply to ignore the regulatory functions of administrative agencies as authorized by statute. Campbell v. Chatwin, Supra.

Subsection E must be read in connection with the preceding sections of A.R.S. § 32--1159. Sections A, B, C and D of this statute deal with the appellate procedure available to one aggrieved by a decision of the Registrar of Contractors. Section E must have been intended to apply in those situations where the Registrar has suspended or cancelled a contractor's license,...